Australia’s High Court clarifies test for registrability of trade marks

In a landmark trade marks judgment delivered on 3 December, the High Court in Cantarella Bros v Modena Trading [2014] HCA 48 has clarified a critical aspect of Australian trade mark law relating to the test for inherent adaptation to distinguish (inherent distinctiveness) under section 41.

In upholding Cantarella’s appeal, the four judge majority found that CINQUE STELLE and ORO were inherently distinctive in respect of coffee, on the basis that their ordinary signification or meaning had no direct reference to the character or quality of coffee. The test applied by the majority is focused principally on the perceptions of the target audience as at the filing date.

Gageler J dissented, considering that the lack of a direct reference to the character or quality of the goods or services will not necessarily be enough on its own to render a mark inherently distinctive. The dissenting opinion focused on the needs of traders, and took into account contemporary uses.

In focusing on the perceptions of the target audience rather than the needs of traders, the majority’s reasoning potentially opens the door to a more liberal system for registering trade marks in Australia.

Section 41

Section 41 (in the form litigated) requires that an Australian trade mark application be rejected if the mark is not capable of distinguishing the designated goods and/or services. A key aspect of this assessment is the extent to which the mark is inherently distinctive as that will determine which subsection then applies. There are effectively three possibilities under Australian law:

The mark is sufficiently inherently adapted to distinguish, and can be registered without more (section 41(3));

The mark has some – but not enough – inherent adaptation to distinguish, in which case it can only be registered if it is considered that the mark does or will distinguish, which is determined based on a combined consideration of: (i) the extent to which the mark is inherently distinctive; (ii) the use or intended use of the mark; and (iii) any other circumstances (section 41(5));

The mark has no inherent adaptation to distinguish, and cannot be registered absent factual distinctiveness as at the filing date (section 41(6)).

Only (a) was considered in detail by the High Court.

Cantarella – the facts

Cantarella owned Australian trade mark registrations for CINQUE STELLE and ORO, Italian for “five stars” and “gold” respectively, in respect of coffee. Modena imported coffee products from Italy which bore the signs CINQUE STELLE and ORO. Cantarella sued Modena for trade mark infringement. Modena counter-claimed that Cantarella’s CINQUE STELLE and ORO registrations were invalid on the basis that they were not inherently adapted to distinguish.

At first instance, Emmett J held that Modena infringed Cantarella’s registrations. The attack against Cantarella’s registrations failed. Emmett J was “not persuaded that any more than a very small minority of English-speaking people in Australia would understand the allusions made by Cinque Stelle and Oro”. His Honour therefore applied a predominantly consumer focussed test to the question of inherent distinctiveness, i.e. what does the ordinary signification of the word mean to the relevant consuming public. In his Honour’s view, CINQUE STELLE and ORO were inherently distinctive in Australia because most consumers would not know what those words mean.

The Full Federal Court overturned Emmett J on the validity of Cantarella’s registrations (among other things). The Full Court applied a predominantly trader focussed test, and considered that other traders were likely in the ordinary course of their business to desire to use CINQUE STELLE and ORO on their own coffee-related goods. This was based on the cumulative effect of a number of considerations, including that the words signified quality in Italian, the association in Australia between “pure coffee” and Italy, the fact that Italian was the second most spoken language in Australia (according to the 2001 census) and, “most importantly”, the fact that other traders had used CINQUE STELLE and ORO before Cantarella applied to register those marks (25 March 2000 for ORO and 6 June 2001 for CINQUE STELLE).

Cantarella sought and was granted special leave to appeal to the High Court.

The High Court- the majority (French CJ and Hayne, Crennan and Kiefel JJ)

General principles

The authority most often cited in respect of inherent distinctiveness is that of Kitto J (sitting as a single judge of the High Court) in Clark Equipment (1964) 111 CLR 511 (at 514). In that decision, it was held that inherent distinctiveness is to be tested (the italicized portion being critical inCantarella):

"by reference to the likelihood that other persons, trading in goods of the relevant kind and being actuated only by proper motives – in the exercise, that is to say, of the common right of the public to make honest use of words forming part of the common heritage, for the sake of the signification which they ordinarily possess – will think of the word and want to use it in connexion with similar goods in any manner which would infringe a registered trade mark granted in respect of it." (emphasis added)

The parties were at odds on what Kitto J’s test in Clark Equipment actually meant. Cantarella argued that the italicised text, referring to “ordinary signification” was tested against the “target audience” (that is, consumers). Modena argued that the test was whether other traders might legitimately wish to use the word/s in connection with their own goods.

Interpretation of section 41(3)

The majority considered that the Full Federal Court had misunderstood the expression “ordinary signification”, found by the High Court majority to require consideration of the “ordinary signification” of any word proposed as a trade mark (English or foreign) to any person in Australia concerned with the goods or services to which the proposed trade mark is to be applied. That is so regardless of whether the mark:

is an invented word;

directly refers to a character or quality of the goods;

is a geographic name;

is a surname;

never had the requisite distinctiveness to start with.

In this context, the majority here drew a key distinction between a word making a “covert and skilful allusion” to the goods or services (prima facie registrable) and one making a “direct reference” to the goods or services (prima facie not registrable).

Only after the ordinary signification has been established can an enquiry then be made into whether other traders might legitimately need to use the word in respect of their goods or services. If the mark is a foreign word that contains an allusive reference, it is prima facie qualified for the grant of a monopoly. However, if it is understood as having a directly descriptive meaning, it is not prima faciequalified.

Application of section 41(3) to the facts

The majority found that the words ORO and CINQUE STELLE did not convey a meaning or idea “sufficiently tangible to anyone in Australia concerned with coffee goods as to be words having a direct reference to the character or quality of the goods”. Having reached that conclusion, the majority held that the primary judge was right to reject Modena’s submission that honest traders might legitimately wish to use CINQUE STELLE and ORO to indicate a character or quality of the goods.

The majority therefore concluded that the marks CINQUE STELLE and ORO were inherently distinctive. The appeal was allowed.

Foreign words

For those hoping for clear guidance on the threshold for registrability of foreign words as trade marks in Australia, the High Court’s decision offers only limited assistance. The majority referred to a number of earlier authorities referring to the registrability of words from a foreign language. These authorities established that “it is not the meaning of a foreign word as translated which is critical,although it might be relevant. What is critical is the meaning conveyed by a foreign word to those who will be concerned with the relevant goods” (our emphasis).

However, beyond clarifying the general test for inherent distinctiveness, the majority did not discuss in detail the evidence put forward by Modena in relation to the number of Italian speakers in Australia, simply holding that the evidence relied on by Modena at trial “fell well short” of proving that the words “cinque stelle” and “oro” were “understood in Australia by persons concerned with coffee products to be directly descriptive of the character or quality of such goods.”

What is perhaps clear from the words “although it might be relevant” is that the fact that a foreign word is spelt or sounds like its English equivalent, or that the foreign word is broadly understood for its directly descriptive meaning (in a more clear-cut case such as PHO for soup), may still rob the mark of inherent distinctiveness in a given case.

The dissent – Gageler J

Justice Gageler preferred the Full Court’s approach to the question of inherent distinctiveness, focussing on whether traders of coffee products in Australia would, in the ordinary course of their business and without improper motive, desire to use CINQUE STELLE and ORO in respect of their coffee products. In his Honour’s view, the words which traders desire to use are not confined to ordinary English words, and he was prepared to accept post-filing date third party use in assessing this. He considered that CINQUE STELLE and ORO were not prima facie registrable.

Implications for brand owners

The message from the High Court is loud and clear – the assessment of inherent distinctiveness is a two-step process, which first considers the ordinary signification of the mark and then (only if necessary) considers the likelihood that other traders would need to be free to make use of that word for its ordinary signification.

In this assessment, the position following Cantarella is that the perceptions of those in the target audience at the relevant date appear more relevant than the needs of other traders. For a foreign word, it is not the meaning of the word as translated that is critical, but its signification to Australian consumers of the relevant goods.